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Woolworths and Wesfarmers become top-20 global retailers, as digital remains front of mind

Two Australian retailers have made it onto a list of the top-20 global retailers, showing that despite the current economic situation, some businesses are still thriving.

Both Woolworths and Wesfarmers made it on to Deloitte’s Top-250 retailers list, which was released in their 16th annual Global Powers of Retailing report. Ranked 17 and 18 respectively, they were the only Australian companies to have the required $3.5bn turnover needed to make the cut.

Geographic footprint

Out of the top-20 retailers on Deloitte's list, thirteen had operations in at least five different countries and as a group, the top-10 retailers had a much larger geographic footprint than the top-250 overall.

On average, these retailers operated in more than fifteen countries, making the ranking of the two Australian supermarkets particularly unique.

Not only do Woolworths and Wesfarmers not operate globally, but they rely on a somewhat small domestic market but still achieve impressive turnovers.

David White, partner and retail industry leader at Deloitte Australia, believes that reaching out to a global market is the reason why many of the retailers on the list outperformed their rivals.

He also stresses that Australian retailers will have to stop ignoring overseas opportunities if they want to succeed this year:

One of the increasing trends we’re seeing for these global retailers is international expansion. With stalling domestic markets in major markets such as North America and Europe, increasingly retailers have looked overseas to maintain their growth and maintain their margins.

One of the major markets that a lot of people are looking at is China, with somewhere over a $2tn retail market there, with growth rates over 10%.

So China and a number of other countries in Asia clearly have opportunities for Australian retailers, and we’re already seeing some retailers have success.

Focus on digital

The Deloitte report also goes on to highlight the increasing importance of digital – an area which recent research has revealed that Australian retailers seem to be beginning to use efficiently to their advantage.

Focusing specifically on creating an multichannel customer experience, using a combination of consumer technology, digital tools, smart internal skills and the consideration of connecting virtual and physical realities, three core areas should be considered:

The retail industry is in the midst of a customer revolution. The collision of the virtual and physical worlds is fundamentally changing consumers’ purchasing behaviours.

Consumers are seeking an integrated shopping experience across all channels, and expect retailers to deliver this experience. Failure to deliver puts retailers at risk of becoming irrelevant.

The key drivers of this customer revolution are the rapid adoption of mobile devices, digital media and tablets equipped with shopping apps.

Traditional retailers must find opportunities to seamlessly embed the virtual world into their retail strategy by developing in-store and online technologies that allow them to create and maintain meaningful and sincere connections with customers across all channels.

The year ahead

White is feeling positive about the Australian retail market in 2013, but is predicting it to be quite the competitive year, with many foreign players setting up stores in Australia, something that I’ve raised as a complex issue before. He says:

With the strengthening of the Australian dollar and the increasing use of online as a medium for shopping, many Australians have taken to purchasing products from overseas. This has awakened global retailers to demand for their products from Australian consumers.

It has also given them vital information on what Australian consumers want which is a significant benefit when setting up business in Australia.

While the increased competition may be making some local retailers nervous, White also believes this is an opportunity for retailers to adapt and change:

Undoubtedly, the recent arrival of sophisticated global retailers like Zara and Topshop into Australia... is increasing competition; however, we shouldn't forget that Australian retailers still have a number of advantages including a greater knowledge of the local market, customers and seasons; an established customer base; and prime store locations.

Being price competitive will always be an important part of a retailer’s strategy, but it can only have limited success against a retailer with a global presence and potential greater economies of scale.

Therefore it will be vital to differentiate and adapt, be it through product or customer innovation, branding, sales channels, speed to market or customer experience.

With some of the largest global retailers entering the market it’s an opportunity for Australian retailers to step up to the challenge.

Australian retailers need to have a long term strategy which addresses globalisation and which ensures they have a point of difference. In doing so, many more Australian retailers will be competing and potentially succeeding against some of the biggest retailers in the world.

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